RioZim projects revenues of $185 million

Published: 10 June 2013

RioZim expect revenues of $185 million in the year 2013 compared with $72 million last year whilst EBITDA is expected to be at $23 million compared with $7 million in 2012, group CEO Ashton Ndlovu told an analyst briefing on Friday.

The group also expects a 251% growth in operating profits and EPS of 23.5c compared with the loss per share of 12.1c.

"We expect the turnaround witnessed will continue through increased production," Ndlovu added.

Gold production at Renco is expected to increase by 15% to 780kg and revenues to increase by 26% to $43 million from $34 million in prior year.

Operating margins are also expected to increase to 30% from 25% as management expect production cost per ounce will decline from the current $1.100 to between $850-$900 per ounce. EBITDA is expected to be at $13 million which is a 32% growth from prior year.

In ENR, base metals according to management is expected to improve by 116% to 9,973t whilst PGMs production is also expected to rise by 131% to 162t compared to 70t.

Revenue and EBITDA for ENR is expected to grow by 310% and 83% respectively to $142 million and $10 million.

Ndlovu also told analysts that RioZim is better than what it was last year by this time.

"By this time last year the group was in a deep financial crisis as we owed creditors $91 million of which $60 million was owed to banks," Ndlovu said.

"ENR was still loss making whilst Renco Mine's production was at an all-time low of 40kg in April 2011. We also had five banks that were seeking judicial management," he added.

The group CEO however said, "…we are pleased to present to you our story one year earlier where we managed to get $11.6million through private placement and rights issue from GEM Group."

Ndlovu told the meeting that Gem Group led the restructuring of the RioZim Group which involved capital injection, renegotiation of banking facilities, strategic overhaul of the business and appointing new management.

The group treasurer Bekhinkosi Nkomo presented the financial highlights where he noted revenue growth of 33% to $72.38million.

EBITDA growth of 317% to $6.90 million was witnessed and the group treasurer noted that operating profit of $4.64million was registered compared to a loss position of $1.48million in the prior year.

"Our overall performance was weighed down by the huge interest bill of $11.84million. However, we are happy to inform you that the interest bill was 13% lower than prior year.

"The lower interest bill and positive performance saw RioZim trimming its loss by 48% to $7.47million compared to $14.50million," he added.

Turning to the balance sheet, Nkomo noted the 24% decline in short term debt to $44.53 million and also told the meeting that they were pleased to have increased their long term debt to $17.68 million from $2.16 million.

"The reason for long term increasing is good for us as it lowers our interest bill and also it's a sign of confidence and improved relations that we are having with our bankers," said Nkomo.

Nkomo highlighted that equity increased by 19% due to reduction in losses and also the capital injection by GEM Group.

The group treasurer said ENR's contribution to revenue increased from $25 million to $35 million whilst Renco's revenue rose to $34 million from $28 million.

"The group had a positive second half and this saw Ebitda of $4.2 million compared to a loss of $1.7 million in 2011.

"Operating profits at second half were higher at $3.1 million compared to a loss of $3.6 million in 2011. In the first half the operating profit declined to $1.5 million from $2.1 million in the prior year. This shows the second half of 2012 was much better than the first half," Nkomo noted.

Nkomo mentioned that they managed to pay $17.8million to banks as the capital amount and $11.8 million as finance or interest costs.

Furthermore, he said the group sold excess property in Msasa at a profit of $175 474 whilst head count at the head office was reduced to 33 from 133 employees.

"The turnover increase at Renco was 26% due to price and 74% attributed to volumes increase. Our total production cost per ounce declined to $1 171 from $1 233 due to increased output," he added.

Nkomo noted that ore milled improved to 222 090 from 217,219tons whilst bullion increased to 678kg from 576kg in prior year.

The group CEO presenting his outlook told the meeting that 2012 turnaround was due to successful recapitalisation and also due to improved relationships with bankers and suppliers.

"Our relations with bankers improved to the extent that we turned from being adversaries to partners and this saw bankers withdrawing their judicial management exercise," the group CEO added.

He also noted the group performance was due to the approved retrenchment exercise which resulted in cost savings of $2 million per annum and also the termination of the unviable Centametall toll refining agreement.

Ndlovu however highlighted the impediments for 2012 which were the prolonged termination of the Centamettal agreement, problems with the smelter at BCL which disrupted supply of matte.

"Drivers' strike in South Africa affected availability of consumables mainly for Renco in the fourth quarter and also in January. The strike happened at a time when we normally will be building our stocks," he lamented.

"The high legacy debt also affected our performance and the sands treatment project at Cam and Motor was unprofitable. We subsequently terminated the contract," the group CEO told the gathering.

"The fundamentals however remain strong despite the impediments met last year."

Ndlovu told the meeting that there was a Memorandum of Understanding in place for a joint venture with DRD Gold on Renco Dumps.

"We are also targeting to open Cam and Motor and focussing on selective acquisitions of producing gold mines within 40km radius of Effiel Flats which will feed Cam and Motor," Ndlovu said.

He also told the meeting that they were investing in vamping and Hilti machines to improve grades and reduce power consumption. "We are also targeting to move away from hydro drills to electric drills as it reduces our costs by 30%."

Turning to ENR which falls under Rio Base metals, he said they were working on installing an own 20 tonne per day (tpd) which has $318 000 cost saving per month and are also working on refurbishing the existing 17tpd with BOC Gases.

"All these efforts are necessary as oxygen is one of our major cost item. The installation of the new plant has a payback of under a year. The installing of a new plant and refurbishment of the existing plant will see our installed capacity rising to 35tpd compared to 17tpd."he noted.

He also said they were working on a transition from low sulphur to high sulphur matte. In Rio Energy, Ndlovu indicated that they were now working on a phased approach with Phase 1 targeting to build a 150 MW plant compared to a one time plant of 2 400MW at Sengwa.

Ndlovu told the meeting that they were in talks with an Italian firm to merge chrome mining and processing assets whilst they intend to reduce head count to 20 at head office.
"We are also targeting debt restructuring with banks to at least 24-36 months which will lower our interest bill."

With regard to salaries of workers Ndlovu said, "… we recently approved a 7% increase in their salaries despite our employees generally receiving salaries which are 14% above NEC."

Ndlovu noted the key risk being political uncertainty which he termed was best explained by the Renco mine disruption.

"We however resolved the issue and receive appropriate intervention through the courts," he said.

- zfn

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